Clarifying the Entrepreneurial Orientation Construct and Linking it to Performance

Abstract

Clarifies the nature of the entrepreneurial orientation (EO) construct and proposes contingency models for investigating the relationship between EO and firm performance. EO is contrasted to entrepreneurship. Entrepreneurship is new entry. Entrepreneurial orientation is the processes, practices, intentions, and decision-making activities leading to new entry. It has five key dimensions: autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness. Although all five dimensions are central to understanding the entrepreneurial process, they occur in different combinations, and the factors vary independently in a given context. Contingency theory suggests that congruence among variables (such as environmental and organizational factors) is crucial for optimal performance; hence the relationship between EO and firm performance is context specific. Key contingencies associated with the relationship between EO and performance are identified. Then four alternative contingency models (moderating, mediating, independent and interaction effects) are proposed for the purpose of testing the relationship of EO and performance. The analysis further delineates various organizational characteristics related to each of the four models that may impact firm performance, including the structure chosen, integrating activities, top management team characteristics and the industry. These characteristics may all affect the five dimensions of entrepreneurial orientation and impact performance. (TNM)

Keywords: Contingency theory, Startups, Autonomy, Risk orientation, Entrepreneurial environment, Firm characteristics, Entrepreneurial orientation, Firm performance